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Are bankers exempt from a fiduciary duty?

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Are bankers exempt from a fiduciary duty?


It is generally accepted that company directors have a fiduciary duty to their shareholders. The word itself comes originally from the Latin fides, meaning faith, and fiducia, trust. In other words, a fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. As is the case of a company director.

If we assume that the directors of banks also have this fiduciary duty, why is it that they are being asked to resign, rather than being sacked? In addition to their fiduciary duty, directors must exercise a reasonable standard of care and act responsibly. Now, whilst there is some reasoned argument that the world economic situation compounded the problems our banks faced, it is ludicrous in the extreme to suggest that this is the sole reason for their demise and therefore, the need for vast amounts of taxpayers money to bail them out. With position comes responsibility, if the directors of our banks got it wrong, then they must pay the price. It is after all, they (collectively or otherwise), who made the decisions that ultimately lead to the failure of these once great institutions. Theoretically at least, if any director failed in their fiduciary duty, acted recklessly or without due care then, not only could they be sacked, but they could find themselves liable to a civil action. That notwithstanding, it is clear to me, that if ‘trust and confidence’ is an integral part of a fiduciary’s duty, then there has been a failure.

Government ministers have consistently talked about the fact that there must be “no reward for failure”, this pre-supposes that the bankers have failed,if this is the case, then by which yardstick? Is it in terms if their fiduciary duty, duty of care or that they have acted recklessly? If they have failed, then why were they allowed to leave voluntarily, with or without a compromise agreement? Why weren’t they sacked, why haven’t we heard ministers talk about suing directors that have failed? Could it be that those in public office also have a fiduciary duty and that they themselves could be subject to litigation? I don’t know the answers, I am no lawyer, but I say this, if there is no reward for failure, then there must be action against anyone that has failed in their duties. Not for revenge, but to prevent this happening again. In addition, if the government is correct in its assertion that certain bankers have failed, then surely, the right way to go is not to renege on the terms of any compromise agreement, but to sue the individual in their personal capacity. These individuals have either failed or they have not, ministers must be careful in making damning statements, yet failing to back them up with appropriate action.

I am not qualified legally or otherwise to determine whether or not any individual director has failed in their fiduciary duty. Therefore I am not suggesting anyone (bankers or otherwise) has acted improperly, I am relying only on the governments own words, that there should be no reward for failure, which implies that there has indeed been a failure. However, in the “court of public opinion” I would like to state for the record, that I believe there is merit, perhaps even a duty, for the government to seek legal advice on this matter, because they, as a majority shareholder in these banks, have their own fiduciary duty to the shareholders, you and me!

Posted in Conservatives, General, Labour, Lib Dems | Comments (4)

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